Chapter 3
Operating a Lake Association
Voluntary lake associations in Wisconsin have tremendous opportunities
to address lake and watershed management issues. The Wisconsin
Legislature has consistently recognized their potential by making qualified
lake associations and nonprofit conservation organizations eligible for cost
sharing funds and other state assistance. Federal tax-exempt status makes
contributions to lake associations tax deductible and helps win support from
businesses, individuals and foundations.
When a voluntary association has a substantial agenda, it can organize in
such a way as to qualify as tax-exempt and meet the qualifications of a nonprofit conservation organization. When an organization plans extensive
political and lobbying activities, exempt status should not be sought.
Chapter 1 gave you an idea of the types of lake associations that can be
formed and the activities in which lake associations become involved. Unlike
a lake district, once a voluntary lake association is formed there are few legal
or formal requirements. If you have decided to incorporate under Chapter
181 of the Wisconsin Statutes or become a 501(c)(3) tax-exempt organization,
there are certain requirements to keep those designations current. Other
than those few requirements, how you decide to operate day-to-day is up to
the members of your organization. Many organizations develop bylaws (see
Appendix A for model bylaws) and many follow Roberts Rules of Order to run
their meetings. (For more information on Roberts Rules of Order, see
www.robertsrules.com). Beyond that, there are few requirements, but there
are some helpful hints.
So Where Do We Start?
There may be some time that passes between deciding to form an association
and the first formal meeting. If that is the case, think about selecting an initial
steering committee to govern until an election can be held at an official first
meeting.
There are certain things you may want to accomplish at the first formal
meeting or within the first year of existence. Developing a well thought-out,
organized plan of action and a solid set of protocols and procedures under
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Chapter 3: Operating a Lake Association
which to operate should go a long way toward assuring you reach your
lake organization goals. Make sure this is done with the input of any and all
people interested in being involved.
• Form a committee to start the process of developing bylaws so they can
be approved by the membership at the first official meeting. Bylaws
establish the formal structure and procedures of the association, and
include: the stated purpose of the association; the date of the annual
meeting; the numbers and appointments of officers and directors;
the election procedures; and the formal committee structure, etc. (see
Appendix A for model bylaws)
Wis. Stat. § 181.0122
• Consider becoming a Qualified Lake Association (see Chapter 2)
• Consider incorporating as a Wisconsin nonprofit, non-stock corporation
under Chapter 181, Wisconsin Statutes. The process is relatively
inexpensive and straightforward to do. A lawyer is not usually necessary.
The articles of incorporation are filed with the Department of Financial
Institutions (DFI). The form DFI/CORP102 is available online at
www.wdfi.org/corporations/forms/corp181forms.htm (Form 102) and is
to be filed with the fee with DFI, PO Box 7846, Madison, WI 53703-7846,
608-261-7577. The filing fee currently totals $35 (see Appendix B for a
copy of the form)
• Consider using Robert’s Rules of Order. For more information on
Robert’s Rules of Order, see www.robertsrules.com. Most organizations
operate using Robert’s Rules, which helps the organization be fair and
complete in conducting its meetings. Officers and members of your
group can easily obtain a copy. Behind Robert’s Rules are many years of
experience with meetings, so the guidelines anticipate most questions
that will arise
• Nominate and elect officers
• Form any other standing committees that you feel are important.
Examples of the topics lake association committees typically address
include: aquatic plant and aquatic invasive species management;
education; water quality; volunteer lake monitoring; shoreland
development; water recreation; public relations; government relations;
and grants and fundraising
Taxes
By their very nature, lake organizations are involved with money. They often
need to help pay for some lake management techniques and do it through
fundraising events, dues, grants and other methods. If your association is
involved with employees, grants, fundraising or collects more than $5,000
a year, it is a good idea to contact a professional accountant and make sure
your organization is complying with federal and state tax laws. It is also a
good idea to have someone check the various tax laws from time to time for
changes and updates.
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Chapter 3: Operating a Lake Association
Typically, lake associations are considered exempt from paying federal and
state income tax if they have annual gross receipts of less than $5,000. If your
association receives monies exceeding $5,000 per year, or $15,000 over a
three-year period, you may want to speak with an accountant (be sure they
are familiar with nonprofit organizations). You may want to research the
benefits of having the Internal Revenue Service (IRS) officially recognize your
organization as having tax-exempt status. To establish exemption with the
IRS, your organization should file for official recognition. More information
can be found below.
Federal Tax-Exempt Status
Some associations may consider filing for federal tax-exempt status. Many
people confuse nonprofit with tax-exempt organizations. Not all nonprofit
groups are exempt from federal or state income tax. Typically, lake
associations are considered exempt from having to file federal and state
income tax returns if they have annual gross receipts of less than $5,000. If
your association receives monies exceeding $5,000 per year, or $15,000
over a three-year period, contact an accountant familiar with nonprofit
organizations.
To establish official exemption with the IRS, your association should file for
federal tax-exempt status. Governmental units, including lake districts, enjoy
the advantages of being exempt from federal income tax automatically.
Federal tax-exempt status provides several advantages:
• The organization is not subject to federal or state income tax
• A person that gives a gift to a qualifying tax-exempt organization is
eligible to claim a tax deduction, which may encourage people to give
money to the organization
• Tax-exempt organizations can obtain bulk postal rate privileges
• Because most foundations are also tax-exempt organizations, they often
can only award grants to groups recognized as tax-exempt
Although there are various types of tax-exempt organizations, a typical lake
association would seek status as a “charitable, scientific or educational”
organization under Section 501(c)(3) of the Internal Revenue Code. To
qualify as an exempt organization under Section 501(c)(3), an organization
must be structured and operated exclusively for “exempt purposes.” These
may include scientific, educational and charitable activities. Water pollution
prevention and control, land protection, and other activities of many lake
associations are considered “charitable” under federal tax law. The IRS has
specifically recognized that an organization formed to preserve a lake as a
public recreational facility and to improve the condition of the water in the
IRS Rev. Rule 70-186
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Chapter 3: Operating a Lake Association
lake is operated exclusively for charitable purposes.
Federal tax-exempt organizations are also subject to important limitations
on their activities under Section 501(c)(3). The IRS requires that these
specific limitations on powers be included in the organization’s articles of
incorporation or other charter. The most important of these are:
1. No part of the net income or earnings of the organization may be
distributed to any director, member or other individual. (This does not
prohibit compensation for services performed.)
2. Exempt organizations may not engage in political activity and are sharply
limited in their authority to undertake lobbying activities.
Not all Section 501(c)(3) organizations are created equally. Federal tax law
makes a distinction between “private foundations” and “publicly supported
charities.” Both are exempt from taxation, but public charities offer donors
greater tax benefits. In general, an organization is considered to be publicly
supported if it normally receives at least one-third of its total support from
the combination of government or public contributions. The law on exempt
organizations, including private foundation determination, is complex and
may be difficult to understand. This section is not intended to go beyond a
very general description of these provisions.
In order to obtain tax-exempt status under Section 501(c)(3), an organization
is required to file IRS Form 1023 and related schedules and exhibits, copies
of the organization’s Articles of Incorporation, bylaws, and financial records
including a two-year budget for new organizations and other materials.
These documents are intended to explain the organization’s proposed
activities in order to demonstrate that it meets the requirements for
exemption. Wisconsin organizations file these papers with the IRS Exempt
Organization Office in Chicago. For a brochure on applying for tax-exempt
status, see www.irs.gov/pub/irs-pdf/p4220.pdf. For detailed information on
public charities and forms, see www.irs.gov/charities/charitable.
From the date of filing, it typically takes about six months to obtain a
determination letter. The IRS review is quite detailed, and will usually return
an incomplete or improperly prepared application, rather than request
specific modifications. A nonrefundable determination user fee is payable
at the time the application is filed. These user fees range from $150 to $500
depending on the expected annual receipts of the applicant organization.
Some organizations recruit knowledgeable volunteers to develop the taxexempt status application, others obtain professional assistance from an
experienced attorney or accountant. Attorneys’ fees may vary depending on
the amount of work needed to prepare the application materials and obtain
federal tax-exempt status.
If you want to find out more about federal tax-exempt status, contact an
accountant or the IRS Tax Exempt and Government Entities Division at
1-877-829-5500.
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Chapter 3: Operating a Lake Association
If you plan on applying for federal tax-exempt status under Section 501(c)(3),
you will need to obtain an Employer Identification Number (EIN), also
known as a Federal Tax Identification Number. Most banks will require
your organization to have an EIN in order to open a bank account. An EIN
is a nine-digit number that the IRS uses to identify nonprofit organizations,
government entities, trusts and estates, and other business entities. To obtain
an EIN, an organization can apply to the IRS using Form SS-4, Application for
Employer Identification Number. For more information see www.irs.gov/
Most banks will
require your
organization to
have an EIN in
order to open a
bank account.
businesses or call 1-800-TAX-FORM for a copy of the form.
State Sales Tax-Exempt Status
Rarely does a lake organization purchase enough items subject to state sales
tax to make exempt status worthwhile. If yours does, you may want to look
into applying for state sales and use tax-exempt status. To obtain state sales
tax-exempt status, an organization may apply with the Wisconsin Department
of Revenue for a Certificate of Exempt Status (CES) using Form
S-103, Application for Wisconsin Sales and Use Tax Certificate of Exempt
Status. Lake associations will need to be recognized by the IRS as having
tax-exempt status and submit required documentation. If approved, the
department will issue you a CES number to exempt you from sales tax when
making purchases. Lake districts, since they are governmental units, will
not need to demonstrate their qualifications as nonprofit organizations, but
should use the form to receive a CES number. For more information and
a copy of the form, contact the Wisconsin Department of Revenue or their
website at www.dor.state.wi.us.
Fundraising
Sometimes lake organizations will have special fundraising campaigns in
which they solicit donations from people on the lake as well as the general
public. If you plan to raise significant funds, you may want to consider
applying for status as a 501(c)(3) charitable organization. If donations to
your organization (not including dues) exceed $5,000 in a year, you will need
to register with the Wisconsin Department of Regulation and Licensing. This
agency oversees the regulation of charitable organizations and licensing of
business professions in Wisconsin. For more information, see
http://drl.wi.gov/prof/char/cred.
If you are going to be raising significant funds, contact an accountant,
attorney, the Wisconsin Department of Regulation and Licensing or the
Wisconsin Department of Revenue for assistance.
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Chapter 3: Operating a Lake Association
Financing
Having the dollars to do the needed work and keeping good records is
crucial to any lake organization. There may be numerous sources of dollars
and partners to help in keeping your lake healthy.
• Consider the organization’s general approach to business
• Collect first dues/contributions
• Create an initial budget; consider revenue and debt. The starting date
of the fiscal year is up to the organization. Some select January 1, others
select a date that corresponds with their annual meeting. See the sample
lake association budget on the next page
• Create a bank account, line of credit and any other fiscal business (any
loans or lines of credit will need to be secured). Most banks will require
an Employee Identification Number (EIN) in order to open a bank
account. For information on obtaining an EIN, see the previous section
on Taxes or go to www.irs.gov/businesses
• Plan alternative sources of revenue. These sources may include
fundraisers, grants, dividend income, gifts, retail sales and others
• It may be a good idea to do an informal audit from time to time
depending on the amount of money with which you are dealing
• Agree on a general plan of action for the association, including any
regular business and social meetings, fundraising events, etc.
• Set a system in place to ensure accurate recordkeeping (grants, budgets,
meeting minutes, resolutions). Arrange to keep the records in a secure
place. Consider asking your public library to create a lake section to
showcase meeting minutes, lake-related publications, and other materials
relevant to your community
• Consider applying to the IRS for tax-exempt status. See previous section
on Federal Tax-Exempt Status
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Chapter 3: Operating a Lake Association
Sample Lake Association Budget
Pretty Lake Association
20___ Budget Summary
Revenues:
Dues/Memberships
Interest Income
Fund-Raising
Total Revenue:
Current Year
Budgeted
Current Year
Actual
Next Year
Proposed
$2,500
$
0
$1,000
$3,500
$2,300
$ 50
$ 650
$3,000
$2,500
$ 50
$1,000
$3,550 $ 500
$ 450
$ 500
$ 300
$ 280
$ 300
$ 500
$ 380
$ 500
$
$
0
$ 920
Expenses:
Newsletter, Printing,
Postage
Clean Boats Clean Waters
Boat Landing Watch
Sensitive Area Buoy Markers
Dissolved Oxygen Meter for Lake Monitoring
Insurance
Total Expenses:
$ 500
$1,800
$ 490
$1,600
$ 530
$2,750
Cash Excess/Deficit:
$1,700
$1,400
$ 800
Pretty Lake Association
20___ Statement of Cash Position
Beginning Cash Balance
Cash Excess/Deficit
Ending Cash Balance
0
$1,000
$1,400
$2,400
Grants
Some projects that you wish to undertake may require more capital than your
organization is able to raise. If that is the case, you may consider applying for
one or more lake grants. DNR lake coordinators will work with Qualified Lake
Associations to award state funds to assist with meeting the costs of eligible
projects.
Qualified lake associations are eligible to receive state grant funds for certain
projects under the Lake Management Planning Grant Program. They are
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Chapter 3: Operating a Lake Association
Wis. Stat. § 144.253
Wis. Stat. § 144.254
Wis. Stat. § 30.92
also eligible to receive state matching funds under the Lake Management
Protection Grant Program and Aquatic Invasive Species grants. In addition,
qualified lake associations are eligible for grants for certain recreational
boating projects, including the purchase of capital equipment for aquatic
plant harvesting, for public boat launch facilities and for navigational buoys.
For detailed information on lake grants, see www.uwsp.edu/cnr/uwexlakes.
Insurance
The topic of insurance coverage can be a difficult one for lake organizations
to address. The costs of insurance may vary greatly between lake
organizations, depending on their size and activities. Should these smaller
groups not buy insurance coverage? Are they at risk? Your lake association
may face these questions as you examine your budget and strive to make the
best use of the dollars available. For more information about insurance, see
Chapter 7.
Getting Connected
Being aware of issues that face your lake compel you to be connected. Local
issues may require you to have detailed knowledge of people and their
viewpoints; regional or statewide issues may require you to have a broader
understanding of the implications of different issues and how they affect
others. It is important to stay connected, not only around your lake, but also
in your county, your region, and across the state. To get connected:
• Develop a way to communicate with your membership, other
stakeholders, state government and other lake organizations such as the
publication of a newsletter, email or development of a website
• Use the Lake List Directory (see box on next page) to identify and include
neighboring lake organizations
• Consider developing a logo or stationery for the organization to help
create a professional presence
• Contact local government officials, the WDNR, UW-Extension Lakes
Program and WAL and let them know you exist
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Chapter 3: Operating a Lake Association
The Lake List Directory
Lake organizations do best when they stay in touch with their
neighbor organizations and keep a finger on the pulse of town,
county and state policies and issues that impact lakes. Who could
be better than another lake organization to help answer your
questions on how much insurance costs, who is a good contractor,
or how neighboring lakes deal with aquatic invasives? The state
keeps contact information and some other pertinent information on
lake organizations, as well as businesses providing services to lakes,
in a directory called the Lake List. The directory can be found at
www.uwsp.edu/cnr/uwexlakes. Contact the UW-Extension Lakes
Program at 715-346-2116 or uwexlakes@uwsp.edu when you form
an association and to update contact information on an annual
basis. The Lake List Directory is the most comprehensive directory
of lake organizations in Wisconsin.
Developing a Vision
Lake organizations that have taken the time to articulate their vision have a
better track record of accomplishing their goals. The clearer your vision of
your lake’s future, the easier it will be to develop and follow a roadmap to
your destination.
• Start to formulate the purpose of the association. This may take the form
of a mission statement. For assistance with development of a mission
statement, contact your county UW-Extension Educator
• Start thinking about how to prioritize any lake issues
• Develop a plan to recruit new members
• Start the process of arranging for a pre-planning, or “futuring,” meeting
where all members and those interested in the lake can be heard. Such
a process can help the organization to prioritize issues and help to craft
a vision for the lake. (You may consider using a facilitator to assist you in
developing an inclusive process that is respectful of the many points of
view that frequently exist in lake communities; trained individuals can be
engaged through your county UW-Extension Educator)
• Have a plan. A sound written plan that all interested parties have
contributed to can benefit your lake community and the lake in many
ways. It will be the short and long-term “road map” that will determine
where your efforts and funding will go. A lake management plan can
present a coordinated strategy and assure that everyone knows what is
planned for your lake. It can enhance communication, build consensus,
assure that you will be cost effective with your projects and make sure
you comply with state and federal laws and local considerations. A
written plan can communicate your vision for the lake to new members
of the community, and provide the basis for checking progress toward
your lake protection goals
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Chapter 3: Operating a Lake Association
The Seven Step Plan
What are the steps in creating a plan? No matter what type of plan you are
developing for your lake organization, the basic steps in planning remain
the same. While the specifics and details vary depending on lake size and
management issues, the process of planning (and a plan) typically includes
the following general steps:
1. Goal setting – Organize the effort, identify issues to be addressed, and
agree on the goals
2. Inventory – Collect base information to define past and existing
conditions
3. Analysis – Synthesize the information, quantify and compare current
conditions to desired conditions, research opportunities and constraints,
and set directions to achieving goals
4. Alternatives – List all the possible management alternatives and evaluate
their strengths, weaknesses and general feasibility
5. Recommendations – Prioritize and select preferred management options,
set objectives based on priorities and assets, then draft the plan
6. Implementation – Formally adopt the plan, line up funding, and schedule
activities for taking action to achieve the goals
7. Monitor & Modify – Develop a mechanism for tracking activities and
adjust the plan as it evolves
While each step is necessary, the level of effort and detail for each step will
vary depending upon the project’s goals, size of the lake, and number of
stakeholders. For many Wisconsin lakes, there may be a number of plans that
fold into a whole lake management plan. Lake organizations can develop
plans to deal with water recreation or aquatic plant management, which
should fit easily into a whole lake plan. You should carefully assess your lake’s
needs and then consider the detail required for each step in the process. A
rule of thumb may be that the more complex the issue, and the larger the
lake and population, the more comprehensive the plan will need to be. (For
more details on planning, contact your county UW-Extension Educator.)
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Chapter 3: Operating a Lake Association
Learning About Your Lake
Wisconsin is fortunate to have over 15,000 lakes and a great network of
people to help you get the answers you need. There is probably someone
out there who has dealt with the same issue, can help with funding or has
developed educational materials on the subject. Take the time to learn about
the assets that the Wisconsin Lakes Partnership can bring you:
• Attend the annual Wisconsin Lakes Convention in the spring, and/or
attend one of the numerous regional Wisconsin lake education events
sponsored by area lake organizations. Agenda items and displays usually
include a lot of “how-to-do-its” and “how-they-did-its” on various lake
issues. Most importantly, you get to meet and talk with others who share
common lake interests. Information on upcoming events is posted on the
web at www.uwsp.edu/cnr/uwexlakes
• Make use of the resource organizations described at the beginning of
this guide, including UW-Extension Lakes, your county UW-Extension
Educator, WAL and your DNR Lakes Coordinator.
• Get on the mailing list of Lake Tides, the free quarterly newsletter
published by UW-Extension.
• Consider joining the Wisconsin Association of Lakes (WAL), and subscribe
to their newsletter, The Lake Connection. Find more information at
www.wisconsinlakes.org
• Subscribe to the bimonthly DNR magazine, Wisconsin Natural Resources,
at PO Box 7191, Madison, WI 53707, 800-678-9472.
Finding a Rhythm
There you have it! It can be a lot of work but something that most people feel
is well worth the effort. As the years pass, your organization will probably
find a rhythm. Local folks, members, local businesses and government people
who know the lake will develop a certain level of trust for your mission and
work. Some may become active partners in implementing your program.
Revisit your plan to see how closely you have been able to follow it. Identify
those priorities that may have changed; a plan should evolve and change as
the lake and needs of the community evolve and change. Make sure people
stay engaged in this process, and that they are able to understand how their
actions play a role in the health of the lake and the lake community. It is
important that everyone understands, and relates to, the issues and priorities
of the lake and its surrounding community.
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